ASSET PURCHASE AGREEMENT
DATED AS OF FEBRUARY 19, 1998,
BUT EFFECTIVE AS OF JANUARY 1, 1998
AMONG
MICRO-SOFTWARE DESIGNS, INC. ("SELLER"),
MD ACQUISITION, INC. ("BUYER"),
INFOCURE CORPORATION ("INFOCURE"),
▇▇▇▇▇▇ ▇▇▇▇▇ ("▇. ▇▇▇▇▇")
AND
▇▇▇▇▇ ▇▇▇▇▇ ("▇. ▇▇▇▇▇")
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 19th day of February, 1998, but effective as of January 1, 1998, by and
among MICRO-SOFTWARE DESIGNS, INC., a New York corporation (the "Seller"), MD
ACQUISITION, INC., a Connecticut corporation (the "Buyer"), INFOCURE
CORPORATION, a Delaware corporation ("InfoCure"), ▇▇▇▇▇▇ ▇▇▇▇▇, a resident of
the State of Connecticut ("▇. ▇▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇, a resident of the State
of Connecticut ("▇. ▇▇▇▇▇") (▇. ▇▇▇▇▇ and ▇. ▇▇▇▇▇ are sometimes referred to
collectively herein as the "Shareholders" or individually as a "Shareholder").
Seller, Buyer, InfoCure and Shareholders are referred to collectively herein as
the "Parties."
RECITALS:
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A. Shareholders own collectively one hundred percent (100%) of the issued
and outstanding capital stock of Seller consisting of one hundred (100) shares
of Seller's voting common stock in the following proportions: ▇. ▇▇▇▇▇, fifty
(50) shares or fifty percent (50%) and ▇. ▇▇▇▇▇, fifty (50) shares or fifty
percent (50%).
B. Seller is engaged in the medical practice management software business
(the "Business").
C. On the terms and subject to the conditions set forth herein, the
Parties desire to enter into this Agreement, pursuant to which Buyer will
purchase from Seller and Seller will sell to Buyer, substantially all of
Seller's assets and properties relating to the Business.
COVENANTS:
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In consideration of the mutual representations, warranties and covenants
and subject to the conditions herein contained, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF THE ASSETS.
1.1. Purchased Assets. On the terms and subject to the conditions contained
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in this Agreement, on the Closing Date (as hereinafter defined), Buyer shall
purchase from Seller, and Seller shall sell, assign and deliver to Buyer, the
Purchased Assets (as hereinafter defined), free and clear of all liens, security
interests, options, charges and other restrictions whatsoever (hereinafter
referred to as "Encumbrances") except for the Permitted Encumbrances referenced
in Section 4.7. below. The term "Purchased Assets" shall mean all the following
assets, properties, rights, titles and interests of every kind and nature,
whether tangible or intangible, and wherever located and by whomever possessed,
related to the Business of Seller on the date hereof, with such changes therein
after the date hereof as shall be permitted pursuant to the terms hereof (the
"Purchased Assets") including, without limitation, all of the following assets
related to the Business (but excluding all "Excluded Assets" as defined in
Section 1.2.):
1.1.1. All cash and cash equivalents on hand and in banks,
certificates of deposit, commercial paper, stocks, bonds and other liquid
investments of Seller;
1.1.2. All prepayments and prepaid expenses (including, without
limitation, any and all prepaid insurance, lease payments and deposits and
customer deposits) (the "Prepayments");
1.1.3. All inventories, work in process and supplies;
1.1.4. All rights existing under all supply and distribution
agreements and arrangements, sales and purchase agreements and orders (including
unfilled orders for products and services of the Business), real and personal
property leases, license agreements, consulting agreements, confidentiality and
non-disclosure agreements, including, without limitation, such agreements with
current or prior customers and current or prior employees, agents, officers and
directors ("Confidentiality Agreements"), and under all other contracts,
agreements and arrangements, but only to the extent the foregoing are assignable
or transferable to Buyer; provided, however, Seller hereby covenants that all of
the foregoing will be assigned or transferred to Buyer at Closing, except for
those agreements, arrangements, orders and leases set forth on SCHEDULE 1.1.4
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attached hereto;
1.1.5. All lists and records pertaining to customer accounts
(whether past or current), suppliers, distributors, personnel and agents and all
other books, ledgers, files, documents correspondence and business records;
provided that Seller shall be given copies of these records upon request, as
such records exist as of the Closing Date;
1.1.6. All claims, deposits, warranties, guarantees, refunds,
causes of action, rights of recovery, rights of set-off and rights of recoupment
of every kind and nature, other than those relating exclusively to Excluded
Assets or Excluded Liabilities (each as defined below);
1.1.7. All Owned Software, all of Seller's interest in Customer
Software, all of Seller's interest in Other Software, all Intangibles owned by
Seller, and all of Seller's interest in all Intangibles not owned by Seller, as
those terms are defined in Section 4.9. hereof, together with all copies and
tangible embodiments of the foregoing (in whatever form or medium and including,
without limitation, all copies of all or any part thereof, in object code,
source code or other format, and in all magnetic or optical media);
1.1.8. All, to the extent transferable, permits, licenses,
franchises, orders, registrations, certificates, variances, approvals and
similar rights obtained from governments and governmental agencies and all data
and records pertaining thereto;
1.1.9. All insurance, warranty and condemnation proceeds received
after the Effective Date with respect to damage, non-conformances of or loss to
the Purchased Assets;
1.1.10. All rights to receive mail and other communications
addressed to Seller and relating to the Purchased Assets including, without
limitation, accounts receivable payments;
1.1.11. All fixed assets, furniture, equipment and other tangible
personal property, whether owned, leased or otherwise (including, without
limitation, items which, have been fully
depreciated or expensed), including, without limitation, the assets which are
set forth on SCHEDULE 1.1.11 attached hereto;
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1.1.12. All books, records, ledgers, files, documents,
correspondence, lists, studies and reports and other printed or written
materials;
1.1.13. All accounts, notes and other receivables, including,
without limitation, all receivables from any current or former employee of
Seller (collectively, the "Receivables"); and
1.1.14. All goodwill as a going concern and associated with the
items listed above (including, without limitation, the goodwill associated with
(i) the items referred to in subsections 1.1.7. and 1.1.8. above; (ii) all
telephone numbers, facsimile numbers and web pages owned and used by Seller in
its business) and (iii) the names "Micro Designs" and "Micro-Software Designs,
Inc." and "Micro-Designs Software Corporation" (except that Seller may continue
to use its corporate name for the purpose of winding up its affairs for ninety
(90) days following the Closing Date), and any derivation thereof, and all of
the right, title and interest of the Seller in the logos relating to such names.
1.2. Excluded Assets. Notwithstanding the foregoing, the following assets
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are expressly excluded from the purchase and sale contemplated hereby (the
"Excluded Assets") and, as such, are not included in the Purchased Assets:
1.2.1. Seller's rights under or pursuant to this Agreement
(including, without limitation, Seller's rights to the Purchase Price);
1.2.2. Seller's general ledger, accounting records, minute books
and corporate seal; provided that Buyer shall be given copies upon request of
the general ledger and accounting records for any calendar year beginning on or
after January 1, 1994, as such documents exist as of the Closing Date;
1.2.3. Any right to receive mail and other communications addressed
to Seller relating exclusively to the Excluded Assets or to all liabilities
other than the Assumed Liabilities (as defined in Section 2.2. below);
1.2.4. Those assets of Seller which are set forth on SCHEDULE
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1.2.4; and
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1.2.5. Shares of the capital stock of Seller.
2. PURCHASE PRICE; ASSUMPTION OF LIABILITIES.
2.1. Amount of Purchase Price. In consideration for the purchase of the
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Purchased Assets, Buyer agrees to assume the Assumed Liabilities and to pay
Seller:
A. An amount (the "Base Consideration Amount") equal to
$15,469,770.00.
B. A contingent amount (not to exceed in the aggregate
$4,400,000.00) based upon the performance of Seller's Business during the
twenty-four (24) month period beginning
on January 1, 1998, and ending December 31, 1999, also as determined as provided
herein and under GAAP (the "Earnout Amount").
The "Purchase Price" shall be equal to the sum of the Assumed Liabilities,
the Base Consideration Amount and the Earnout Amount, as adjusted.
2.1.1. Payment of the Base Consideration Amount.
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The Base Consideration Amount shall be paid as follows:
A. $12,769,770.00 in cash by wire transfer at Closing;
B. Delivery to Seller of share certificates representing the
number of shares of InfoCure's $.001 par value voting common stock (the "Stock")
which, when multiplied by the Determined Value per share, equals $2,700,000.00.
The Determined Value per share shall be deemed by the parties to be Ten and
No/100 Dollars ($10.00) per share. Thus, the number of shares of Stock to be
issued to Seller pursuant to this Section 2.1.1.B. is 270,000 shares.
2.1.2. The Earnout Amount. The Earnout Amount is the amount of
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additional consideration which, if earned, shall not exceed, in the aggregate,
$4,400,000.00 in cash, and which is comprised of two (2) portions: (i) the First
Tier Earnout Amount (as defined below) and (ii) the Second Tier Earnout Amount
(as defined below). No Earnout Amount shall be due to Seller if either ▇▇▇▇▇▇
▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇ fails to remain employed with the Buyer or an affiliate of
the Buyer for the full twenty-four (24) month period beginning January 1, 1998,
and ending December 31, 1999 (such twenty-four (24) month period hereinafter
referred to as the "Measurement Period") unless such failure is due to the
termination of such individual's employment without cause (as provided in his or
her employment agreement with Buyer) or for "Good Reason" (as defined in his or
her employment agreement with Buyer) or by reason of such individual's death or
Total and Permanent Disability (as defined in his or her employment agreement
with Buyer).
A. Seller shall be entitled to receive $2,400,000.00 (the
"First Tier Earnout Amount") if the Business of Seller being acquired by Buyer
hereunder produces, during the Measurement Period, net income before interest,
taxes and amortization ("EBITA") of at least an amount equal to $5,280,000.00
(the "First Tier Target EBITA").
B. Seller shall be entitled to receive up to an additional
$2,000,000.00 (the "Second Tier Earnout Amount") based on the amount by which
the EBITA of the Business of Seller being acquired by Buyer hereunder, during
the Measurement Period exceeds a threshold equal to $8,400,000.00 (the "Second
Tier Target EBITA"). If the Business of Seller being acquired by Buyer hereunder
produces EBITA during the Measurement Period in excess of the Second Tier Target
EBITA, then for each One and No/100 Dollar ($1.00) of such excess, Seller shall
be paid an additional Six and No/100 Dollars ($6.00), but in no event shall the
Second Tier Earnout Amount exceed $2,000,000.00.
C. Special Exceptions in the Event of Termination Without
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Cause or For Good Reason. Notwithstanding Sections 2.1.2.A. and 2.1.2.B. above,
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and in lieu of any amounts paid to Seller pursuant to Section 2.1.2.A. or
2.1.2.B. above, if either ▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇ is terminated without
cause (as provided in his or her employment agreement with Buyer) or if either
▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇ terminates his or her employment for "Good Reason"
(as defined in his or her employment agreement with Buyer), then (i) Seller
shall be entitled to receive the First Tier Earnout Amount on January 1, 2000,
if and only if the Business of Seller has produced EBITA (as defined in Section
2.1.2.A. below) for the period commencing on January 1, 1998, and ending on the
last day of the calendar month immediately preceding the date of such
termination (such period hereinafter referred to as the "Revised Measurement
Period") of at least an amount (the "First Threshold") equal to the product of:
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(1) ninety percent (90%) times (2) $5,280,000.0 times (3) a fraction, the
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numerator of which is the number of calendar months comprising the Revised
Measurement Period and the denominator of which is 24 and (ii) Seller shall also
be entitled to receive on January 1, 2000, Six and No/100 Dollars ($6.00) for
every One and No/100 Dollars ($1.00) of EBITA produced during the Revised
Measurement Period that is in excess of an amount (the "Second Threshold") equal
to the product of (1) ninety percent (90%) times (2) $8,400,000.00 times (3) a
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fraction, the numerator of which is the number of calendar months comprising the
Revised Measurement Period and the denominator of which is 24; provided in no
event shall the total amount paid to Seller under both subsections (i) and (ii)
of this Section 2.1.2.C. exceed in the aggregate $4,400,000.00; and provided
further, in no event shall any amount be paid to Seller under Section 2.1.2.A.
or 2.1.2.B. above if either ▇▇▇▇▇▇ ▇▇▇▇▇'▇ or ▇▇▇▇▇ ▇▇▇▇▇'▇ employment is
terminated without cause or for Good Reason prior to January 1, 2000, and the
Business fails to produce EBITA during the Revised Measurement Period of at
least an amount equal to the First Threshold, and in no event shall any amount
be paid to Seller under Section 2.1.2.B. above if such EBITA exceeds the First
Threshold, but is less than the Second Threshold.
D. Prorations; Adjustments. The parties agree that if
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Buyer is combined or merged with one (1) or more affiliates of InfoCure, then
InfoCure shall endeavor to track and determine in a fair and equitable manner
that portion of such new entity's EBITA which should fairly and reasonably be
allocated as arising out of the historical customer base and products and
services of Buyer and Seller as previously conducted.
E. Set-Off. If earned, the Earnout Amount shall be due and
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payable January 31, 2000, subject to setoff for any indemnifiable damages
payable to the Seller Indemnified Parties as provided in Section 12.1.
F. Procedure. In order to insure the parties hereto that
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the Earnout Amount is computed by the Accountants in accordance with this
Agreement and with GAAP in a fair and disinterested manner, the parties agree as
follows:
Each party shall have the right to examine during normal business
hours such books and records of the other party as may be reasonably necessary
in order to verify any determination of the Accountants under this Agreement. If
any party disagrees with any such determination, then that party may submit, at
its sole expense, within thirty (30) days an alternate
determination prepared by a certified public accountant, which the other party
may accept or reject in its reasonable discretion. If the other party rejects
the alternate determination, then the contesting party shall be entitled to
submit such dispute to a certified public accountant acceptable to both parties
who shall determine the accuracy and correctness of the Accountant's original
determination. Both parties shall each bear one-half (1/2) of the expenses of
such certified public accountant. Any additional amounts payable by a party as a
result of the other party's alternate determination shall be made within fifteen
(15) days following the acceptance of such alternate determination or the
resolution of such dispute, as the case may be.
2.1.3. Escrow Agreement. As security for the indemnities provided
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herein by Seller and Shareholders, Seller shall deposit in escrow with the
escrow agent named in the Escrow Agreement attached hereto as EXHIBIT A the sum
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of $500,000.00 in cash (which shall be deducted from the cash portion of the
Base Consideration Amount referenced in Section 2.1.1.A. above and one hundred
four thousand six hundred ninety-eight (104,698) shares of the stock.
2.1.4. Marketability of Stock; Registration Rights Agreements. In
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order to provide Seller with a market for the shares of Stock issued to it as
part of the Purchase Price, InfoCure agrees, for a period of thirty-six (36)
months, to file with the Securities and Exchange Commission (the "SEC") in a
timely manner the reports required under SEC rules necessary to permit Seller to
sell its shares of Stock (and to permit each of Seller's shareholders to sell
his or its shares of Stock) under SEC Securities Act Rule 144.
In addition, InfoCure agrees to enter into, with Seller, a
registration rights agreement in the form attached hereto as EXHIBIT B (the
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"Registration Rights Agreement"). The Registration Rights Agreement will grant
to Seller and to each of Shareholders who acquires Stock from Seller the right
to "piggyback" a registration of the Stock held by them on any primary or
secondary offering of the Stock by InfoCure registered with the SEC to the
extent permitted by SEC rules. This right will extend for a period of thirty-
six (36) months from the Closing Date and be subject to the "market-out"
provisions usually contained in such agreements. Because there may be other
persons to whom InfoCure has issued stock and with whom InfoCure has a
registration rights agreement, Seller's Stock will be registered and subject to
sale, pro rata, with all other holders of InfoCure's shares outstanding at the
▇▇▇▇ ▇▇▇▇▇▇ must elect to avail itself of its registration rights.
2.2. Assumed Liabilities. Simultaneously with the sale, transfer,
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conveyance and assignment of the Purchased Assets, Buyer shall assume and become
liable for the payment and/or discharge of the following liabilities and
obligations in respect of the Business (the "Assumed Liabilities"):
2.2.1. Those relating to or arising out of the contracts, licenses
and permits assigned to Buyer and which are listed on SCHEDULE 2.2.1.
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2.2.2. Obligations to employees for accrued benefits arising on or
after January 1, 1998, which are listed on SCHEDULE 2.2.2.
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2.2.3. Those matters set forth on SCHEDULE 2.2.1.
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2.3. Excluded Liabilities. Except for the Assumed Liabilities set forth in
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Section 2.2., Buyer shall not assume, and shall have no liability for, any
debts, liabilities, obligations, expenses, taxes, contracts or commitments of
the Seller or the Business of any kind, character or description, whether
accrued, absolute, contingent or otherwise, arising out of any act or omission
occurring or state of facts existing prior to or on the Closing Date
(collectively the "Excluded Liabilities" and individually an "Excluded
Liability"). The Seller shall remain fully liable for the Excluded Liabilities.
2.4. Allocation of the Purchase Price Among the Purchased Assets. The
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Purchase Price shall be allocated among each item or class of the Purchased
Assets in accordance with SCHEDULE 2.4 hereto. Seller and Buyer agree that they
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will prepare and file their federal and any state or local income tax returns
based on such allocation of the Purchase Price. Seller and Buyer agree that they
will prepare and file any notices or other filings required pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended, and that any such notices
or filings will be prepared based on such allocation of the Purchase Price.
3. CLOSING.
3.1. Time and Place of the Closing. The closing of the purchase and sale of
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the Purchased Assets shall take place at ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.,
Atlanta, Georgia, at 10:00 A.M., local time, on the second (2nd) business day
following the date on which all conditions to Closing contained in Sections 9.
and 10. have been satisfied or complied with or, if not all conditions have been
satisfied or complied with, all such conditions which have not been so satisfied
or complied with have been waived by the party entitled to the benefit of such
condition. Throughout this Agreement, such event is referred to as the "Closing"
and such date and time are referred to as the "Closing Date."
The parties agree to use their best efforts to cause all conditions to
Closing to occur on or before February 24, 1998 and, if that is done, then the
assets will be deemed to have been transferred as of the beginning of business
on January 1, 1998, but all documents shall be dated the date the Closing occurs
and all representations, warranties and covenants shall extend to that date.
3.2. Procedure at the Closing. At the Closing, the parties agree to take
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the following steps in the order listed below (provided, however, that upon
their completion all such steps shall be deemed to have occurred
simultaneously):
3.2.1. Seller and Shareholders shall deliver to Buyer a Certificate
in the form of EXHIBIT C hereto, certifying that each of the conditions to the
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obligation of Buyer to purchase the Purchased Assets from Seller which is set
forth in Sections 9.1. through 9.8. of this Agreement has been satisfied.
3.2.2. Buyer and InfoCure shall each deliver to Seller a
Certificate in the form of EXHIBIT D hereto, certifying that each of the
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conditions to the obligations of Seller to sell the Purchased Assets to Buyer
which is set forth in Section 10. in this Agreement has been satisfied.
3.2.3. Seller shall deliver to Buyer such deeds, bills of sale,
endorsements assignments, lease assignments and estoppel agreements (duly
executed by the lessor under the leases) and other instruments, including a ▇▇▇▇
of Sale in the form of EXHIBIT E hereto and a Lease Assignment in the form of
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EXHIBIT F hereto, as shall be sufficient to vest in Buyer good and marketable
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title to the Purchased Assets, free and clear of all Encumbrances other than
Permitted Encumbrances.
3.2.4 Buyer shall pay to Seller the Purchase Price (less amounts
to be escrowed pursuant to Section 2.1.3.) by wire transfer in accordance with
the Wire Transfer Instructions attached hereto as EXHIBIT G.
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3.2.5 Buyer shall deliver to Seller instruments, in the form of
EXHIBIT H hereto, as shall be sufficient to effect the assumption by Buyer of
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the Assumed Liabilities.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS.
In order to induce Buyer to enter into this Agreement and to consummate the
transactions contemplated hereunder, Seller and Shareholders, jointly and
severally, make the following representations and warranties as of the date
hereof and as of the Closing Date:
4.1. Organization, Power and Authority of Seller. Seller is a corporation
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duly organized and legally existing in good standing under the laws of New York
and has full corporate power and authority to own or lease its properties and
operate its business, to enter into this Agreement and to carry out the
transactions and agreements contemplated hereby.
The amount and character of Seller's business does not require Seller to
qualify to do business in any foreign jurisdiction other than Connecticut, where
it is duly qualified as of the Closing Date.
Except as set forth on SCHEDULE 4.1, all of Seller's issued and outstanding
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stock is owned by Shareholders, and no other person has any right, claim or
beneficial interest in such shares or other interest in Seller which would
adversely affect or interfere in any manner with this Agreement or the
consummation of the transactions contemplated hereby or affect or interfere with
the ownership and operation of the Purchased Assets and Business by Buyer after
the Closing.
4.2. No Subsidiaries and Affiliates. Except as set forth on SCHEDULE 4.2,
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Seller has within the two (2) year period ending on the Closing Date never owned
or controlled, and does not own or control, directly or indirectly, any stock,
partnership interest, joint venture interest or other security, equity
participation or interest in any corporation, partnership, trust or other
business organization.
4.3. Financial Statements of Seller. Seller has delivered to Buyer the
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following financial statements of Seller, copies of which are attached as
SCHEDULE 4.3:
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4.3.1. Audited balance sheets at December 31 of each of the years
1996 and 1997 and unaudited internal balance sheets as of December 31, 1995;
4.3.2. Audited statements of income and retained earnings and
changes in stockholder's equity for the years ended December 31, 1996 and
December 31, 1997 and unaudited statement of income and retained earnings and
changes in stockholder's equity for the year ended December 31, 1995;
4.3.3. The audited balance sheet of Seller, dated December 31, 1997
(the "Closing Date Balance Sheet"), and the audited statement of income and
retained earnings and changes in stockholder's equity for the year ended
December 31, 1997 (the "Closing Date Income Statement") prepared by the
accounting firm of BDO ▇▇▇▇▇▇▇ (the "Accountants") in accordance with this
Agreement and with generally accepted accounting principles ("GAAP")
consistently applied are referred to herein collectively as the "Closing Date
Financial Statements."
The financial statements are prepared in accordance with
generally accepted accounting principles which have been consistently applied
through the respective periods and present fairly the financial position of
Seller at each of such balance sheet dates and the results of its operations for
each of the periods covered.
4.4. Liabilities of Seller. Except as set forth in SCHEDULE 4.4, Seller has
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no liabilities, debts, commitments or obligations (whether individually or in
the aggregate), of any nature, accrued, absolute, contingent or otherwise,
except:
A. The Assumed Liabilities; and
B. Normal liabilities incurred in the ordinary course of business,
in amounts and for terms consistent, individually and in the aggregate, with
Seller's past practices, since December 31, 1997.
4.5. Tax Matters.
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4.5.1. Except as set forth on SCHEDULE 4.5, Seller has timely filed
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all tax returns and reports required to be filed by it, including, without
limitation, all federal, state and local tax returns, and has paid in full or
made adequate provision by the establishment of reserves for all taxes and other
charges which have become due or which are attributable to the conduct of
Seller's business or ownership of the Purchased Assets prior to Closing. Seller
will continue to make adequate provision for all such taxes and other charges
for all periods through the Closing Date.
Except as set forth on SCHEDULE 4.5, Seller and Shareholders have no
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knowledge of any tax deficiency proposed or threatened against Seller. There
are no tax liens upon any property or assets of Seller.
Except as set forth on SCHEDULE 4.5, Seller has made all payments of
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estimated taxes when due in amounts sufficient to avoid the imposition of any
penalty.
4.5.2. Except as set forth on SCHEDULE 4.5, all taxes and other
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assessments and levies which Seller was required by law to withhold or to
collect have been duly withheld and collected, and have been paid over to the
proper governmental entity.
4.5.3. Except as set forth in SCHEDULE 4.5, the federal and state
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income tax returns and local returns, if any, of Seller have never been audited
by the income tax authorities, nor are any such audits in process. Except as set
forth in SCHEDULE 4.5, there are no outstanding agreements or waivers extending
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the statute of limitations applicable to any federal or state income tax returns
of Seller for any period.
4.5.4 Under its contracts with its customers for sales or licenses
of Seller Software, to the knowledge of Seller and Shareholders, such customers
are liable for any and all sales or use taxes imposed by virtue of or with
respect to such sales or licenses.
4.6. Real Estate of Seller.
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4.6.1. Seller does not own any real property.
4.6.2. The leases described in SCHEDULE 4.6 cover all of the real
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estate leased, used or occupied by Seller in connection with its Business
(collectively, the "Real Property"). Except as set forth in SCHEDULE 4.6, the
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leases described in SCHEDULE 4.6 are in full force and effect and Seller holds a
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valid and existing leasehold interest under each of such leases. Seller has
delivered to Buyer complete and accurate copies of such of the leases described
in SCHEDULE 4.6 and none of such leases has been modified, except to the extent
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that such modifications are disclosed by the SCHEDULE 4.6.
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Seller is not in default and no circumstances exist which would result
in a default, under any of such leases, and to the best knowledge of Seller and
Shareholders, no other party to such leases has the right to terminate,
accelerate performance under or otherwise modify (including upon the giving of
notice or the passage of time) any of such leases. To the best knowledge of
Seller and Shareholders, no lessor under any such lease is in default under any
of such leases.
4.6.3. Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, granted a security deed, subleased or encumbered any interest
in any of the leaseholds or subleaseholds described in SCHEDULE 4.6 which has
------------
not been released or terminated.
4.7. Good Title to and Condition of Seller's Assets.
----------------------------------------------
4.7.1. Except as described in SCHEDULE 4.7.1, Seller has good and
--------------
marketable title to all of the Purchased Assets (other than its interest in its
leasehold premises and leased personal property set forth on SCHEDULE 2.2.1),
--------------
free and clear of all Encumbrances, except for (i) Encumbrances for current
taxes, assessments or government changes or levies on property not yet due or
delinquent or (ii) Encumbrances related to the Assumed Liabilities (Encumbrances
of the type described in clauses (i) and (ii) above are sometimes referred to as
"Permitted Encumbrances") which are set forth in SCHEDULE 4.7.
------------
4.7.2. The inventory and supplies of Seller consist of items of a
quality and quantity usable and saleable in the normal course of Seller's
business at values in the aggregate at least equal to the values at which such
items are carried on its books. The values of obsolete or slow-moving inventory
and inventory of below standard quality, if any, have been written down to the
lower of cost or realizable market values or have been written off.
The value at which such inventories are carried on the Closing Date
Balance Sheet reflects the normal inventory valuation policies of Seller,
stating inventories at the lower of cost or market on a first-in first-out
basis, all determined in accordance with generally accepted accounting
principles.
4.8. Receivables of Seller. Seller has previously delivered to Buyer a
---------------------
complete list of all receivables of Seller as of December 31, 1997, including
accounts receivable, notes receivable and insurance proceeds receivable. Except
for any reserve for bad debts shown on the Closing Date Balance Sheet, and
except as otherwise revealed in the audit performed by BDO ▇▇▇▇▇▇▇, all of the
receivables listed thereon or set forth or reflected in the Closing Date Balance
Sheet, were, as of the dates as of which the information is given therein, and
as of the Closing Date will be valid accounts receivable which are or will be
current and collectible subject to the terms of payment as shall have been
agreed upon between Seller and each customer and as have been disclosed by
Seller to Buyer, and, except as set forth on SCHEDULE 4.8 are not subject to any
------------
settoff or adjustment.
4.9. Intellectual Property Rights of Seller.
--------------------------------------
4.9.1. SCHEDULE 4.9.1 (i) contains a complete list of each
--------------
registration of patents, copyrights, trademarks, service marks, trade names,
maskworks, other Intangibles and Software (collectively "Registrations") which
have been issued to Seller and are related to the Business; (ii) identifies each
pending Registration of Seller with respect to the Intangibles and Software
(defined in Section 4.9.2.M.) which are related to the Business; (iii)
identifies all of Seller's applications for or Registrations regarding the
Intangibles and Software which have been withdrawn, abandoned, or have lapsed or
been denied and (iv) specifies any advice to Seller with
11
respect to the Registration or protectability of the Intangibles and Software
which are related to the Business, summarizing such advice.
SCHEDULE 4.9.1 also identifies (i) each license agreement or other
--------------
written or oral agreement or permission which are related to the Business
("License Agreement") and which Seller has granted to any third party with
respect to any of the Intangibles or Software; (ii) each item of the Intangibles
and Software used or possessed by Seller that any third party owns and the
license, sublicense, agreement or other permission in connection therewith which
are related to the Business (the "Third Party License Agreement"), together with
the term thereof, and all royalties or other amounts due thereon and (iii) each
source code escrow agreement entered into by Seller and relating to such
Intangibles and Software.
Seller has supplied Buyer with correct and complete copies of all
License Agreements and Third Party License Agreements, and except as specified
in SCHEDULE 4.9.1 all License Agreements and Third Party License Agreements may
--------------
be assigned to Buyer free of cost or expense without obtaining the consent or
approval of any other person.
Seller has complied with all License Agreements and Third Party
License Agreements, and to the best of Seller's and Shareholders' knowledge all
other parties to such agreements have complied with all provisions thereof; and
no default or event of default exists under any of the License Agreements or
Third Party License Agreements.
4.9.2.
A. SCHEDULE 4.9.2 is an accurate and complete list and
--------------
description (including a name, product description, the language in which it is
written and the type of hardware platform(s) on which it runs) of all of the
following:
(i) All Software owned by Seller or under development by
Seller related to the Business ("Owned Software").
(ii) All Software, other than the Owned Software, related
to the Business and that is either (x) offered or provided to customers of
Seller when the Owned Software is licensed to such customers or (y) used by
Seller to provide services to customers of Seller which services utilize the
Owned Software (collectively, "Customer Software"; the Owned Software and the
Customer Software are collectively referred to as the "Seller Software").
(iii) All Software, other than Seller Software, related to
the Business that is licensed or marketed to or from third parties or otherwise
used by Seller for any purpose whatsoever (collectively, "Other Software").
B. To the extent not set forth in SCHEDULE 4.9.1, SCHEDULE 4.9.2
-------------- --------------
separately sets forth an accurate and complete list and description of each
copyright, trademark, trademark application or registration, service ▇▇▇▇,
service ▇▇▇▇ application or registration, patent application or registration,
and name and logo included in the Intangibles (as defined below in this Section)
owned, marketed or licensed by Seller related to the Business to or from
12
third parties, used or under development by Seller related to the Business.
SCHEDULE 4.9.2 indicates Seller's ownership of such items or the source of
--------------
Seller's right to use such items.
C. No Software other than the Owned Software, Customer Software
and Other Software is required to operate Seller's business as currently
conducted and as contemplated by existing Seller Software product and service
plans.
D. Except as explained on SCHEDULE 4.9.2 or otherwise disclosed
--------------
in this Agreement or any Schedule, Seller has good and marketable title to the
Owned Software and Intangibles attributable to the Owned Software, and has the
full right to use all of the Customer Software and Other Software, and
Intangibles attributable thereto, as used or required to operate Seller's
business as currently conducted, free and clear of any liens, claims, charges or
encumbrances which would affect the use of such Software in connection with the
operation of Seller's business as currently conducted.
E. No rights of any third party not previously obtained are
necessary to market, license, sell, modify, update, and/or create derivative
works for any Software as to which Seller takes any such action in its Business
as currently conducted.
F. With respect to Software which is licensed by Seller to third
parties or used in connection with the providing of services to third parties in
the Business:
(i) Seller maintains machine-readable master-reproducible
copies, reasonably complete technical documentation and/or user manuals for the
most current releases or versions thereof and for all earlier releases or
versions thereof currently being supported by Seller;
(ii) In each case, the machine-readable copy substantially
conforms to the corresponding source code listing;
(iii) Such Software is written in the language set forth on
SCHEDULE 4.9.2, for use on the hardware set forth on SCHEDULE 4.9.2 with
-------------- --------------
standard operating systems;
(iv) Such Software can be maintained and modified by
reasonable competent Seller programmers familiar with such language, hardware
and operating systems; and
(v) In each case the Software operates in accordance with
the user manual thereof without operating defects of any material nature.
G. Seller has not received any notice or claim that any of the
Software or Intangibles listed on SCHEDULE 4.9.1 or SCHEDULE 4.9.2, or their
-------------- --------------
respective past or current uses by or through Seller has violated or infringed
upon, or is violating or infringing upon, any Software, patent, copyright, trade
secret or other Intangible of any person. None of the Software or Intangibles
listed on SCHEDULE 4.9.1 or SCHEDULE 4.9.2, or their respective past or current
-------------- --------------
uses
13
by or through Seller has violated or infringed upon, or is violating or
infringing upon, any Software, patent, copyright, trade secret or other
Intangible of any person. Seller has adequately maintained all trade secrets and
copyrights with respect to the Software.
H. To the knowledge of Seller and Shareholders, no person is
violating or infringing upon, or has violated or infringed upon at any time, any
of Seller's proprietary rights to any of the Software or Intangibles listed on
either SCHEDULE 4.9.1 or SCHEDULE 4.9.2.
-------------- --------------
I. None of the Software or Intangibles listed on SCHEDULE 4.9.1
--------------
and SCHEDULE 4.9.2 are owned by or registered in the name of Shareholders, any
--------------
current or former owner, or Shareholders, other Shareholders, partner, director,
executive, officer, employee, salesman, agent, customer, contractor of
Shareholders or representative nor does any such person have any interest
therein or right thereto, including, but not limited to, the right to royalty
payments. Except as listed on SCHEDULE 4.9.2, Seller has granted no third party
--------------
any exclusive rights related to any Owned Software.
J. No litigation is pending and no claim has been made against
Seller or, to the knowledge of Seller or Shareholders, is threatened, which
contests the right of Seller to sell or license to any person or use any of the
Owned Software, Customer Software or Other Software. No former employer of any
employee or consultant of Seller has made a claim against Seller or, to the
knowledge of Seller and Shareholders, against any other person, that Seller or
such employee or consultant is misappropriating or violating the Intangibles of
such former employer.
K. Seller is not a party to or bound by and, upon the
consummation of the transactions contemplated by this Agreement, Buyer will not
be a party to or bound by (as a result of any acts or agreements of Seller), any
license or other agreement requiring the payment by Seller or its assigns of any
royalty or license payment, excluding such agreements relating to the Customer
Software to the extent such royalty or license payment is expressly set forth on
SCHEDULE 4.9.2.
--------------
L. Except as set forth in SCHEDULE 4.9.2, the Owned Software,
--------------
Customer Software, and Other Software and the information used by Seller, and
the Intangibles thereunder, are fully transferable to Buyer in the manner
contemplated in this Agreement (in, object code, and if applicable, source code
forms, including all related documentation, to the extent that such
documentation has been created).
M. For purposes of this Agreement, "Software" includes any
computer program, operating system, applications system, firmware or software of
any nature, whether operational, under development or inactive, including all
object code, source code, technical manuals, user manuals and other
documentation thereof, whether in machine-readable form, programming language or
any other language or symbols and whether stored, encoded, recorded or written
on disk, tape, film, memory device, paper or other media of any nature.
"Intangible" means:
14
(i) Patents, patent applications, patent disclosures, all
re-issues, divisions, continuations, renewals, extensions and continuation-in-
parts thereof and improvements thereto;
(ii) Trademarks, service marks, trade dress, logos, trade
names, and corporate names and registrations and applications for registration
thereof and all goodwill associated therewith;
(iii) Copyrights and registrations and applications for
registration thereof;
(iv) Maskworks and registrations and applications for
registration thereof;
(v) All right, title and interest in all computer
software, data and documentation (including, without limitation, modifications,
enhancements, revisions or versions of or to any of the foregoing and prior
releases of any of the foregoing applicable to any operating environment);
(vi) Trade secrets and confidential business information
(including ideas, formulas, compositions, inventions, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, flow charts, processes ideas, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information) related to the Owned Software,
Customer Software, Other Software or Seller's business or products;
(vii) Other proprietary rights;
(viii) All income, royalties, damages and payments due at
Closing or thereafter with respect to the Owned Software, Customer Software,
Other Software, or other Intangibles and all other rights thereunder including,
without limitation, damages and payments for past, present or future
infringements or misappropriations thereof, the right to ▇▇▇ and recover for
past, present or future infringements or misappropriations thereof;
(ix) All rights to use all of the foregoing forever; and
(x) All other rights in, to, and under the foregoing in
all countries.
4.9.3. Except as noted in SCHEDULE 4.9.3, the Owned Software and to
--------------
the best knowledge of Seller and Shareholders, the Customer Software and Other
Software, are "Millennium Compliant." For the purposes of this Agreement
"Millennium Compliant" means:
15
A. The functions, calculations, and other computing processes of
the Owned Software, Other Software and Customer Software (collectively,
"Processes") perform in an accurate manner regardless of the date in time on
which the Processes are actually performed and regardless of the date input to
the Owned Software, Other Software, and Customer Software, whether before, on,
or after January 1, 2000, and whether or not the dates are affected by leap
years;
B. The Owned Software, Other Software, and Customer Software
accept, store, sort, extract, sequence, and otherwise manipulate date inputs and
date values, and return and display date values, in an accurate manner
regardless of the dates used, whether before, on, or after January 1, 2000;
C. The Owned Software, Other Software, and Customer Software
will function without interruptions caused by the date in time on which the
Processes are actually performed or by the date input to the Owned Software,
Other Software, and Customer Software, whether before, on, or after January 1,
2000;
D. The Owned Software, Other Software, and Customer Software
accept and respond to two (2) digit year and four (4) digit year date input in a
manner that resolves any ambiguities as to the century in a defined,
predetermined, and accurate manner; and
E. The Owned Software, Other Software, and Customer Software
display, print, and provide electronic output of date information in ways that
are unambiguous as to the determination of the century.
4.9.4. Without limiting any of the foregoing, to the best knowledge of
Seller and Shareholders, none of Seller's officers, directors, employees or
independent contractors have disclosed to (without proper obligation of
confidentiality) or otherwise used or utilized on behalf of any person other
than Seller, any trade secrets or proprietary information, including, without
limitation, the source codes for Seller Software.
SCHEDULE 4.9.4 identifies all individuals who have contributed to the
--------------
development of the Owned Software.
4.9.5. Except as set forth in SCHEDULE 4.9.5, Seller Software:
--------------
A. Performs in accordance with all published specifications
for such Programs;
B. Complies with all other published documentation,
descriptions and literature with respect to such Programs; and
C. Complies with all representations, warranties and other
requirements specified in all of Seller's License Agreements.
16
4.9.6. Except as set forth on SCHEDULE 4.9.6, Shareholders do not have
--------------
an ownership right or other interest in any Software or Intangibles.
4.9.7. All Seller's contracts with customers in the Business
(collectively "Customer Contracts") for specific customers, whether completed or
outstanding, were or are evidenced by written agreements containing provisions
reasonably equivalent to those contained in SCHEDULE 4.9.7 hereto, with only
--------------
such changes as would not affect the rights of Buyer as assignee thereof and
would not impose on Buyer, as assignee thereof, any additional obligations.
No Customer Contract provided for the transfer to the customer therein
of any Intangibles relating to Seller Software as to which Seller thereafter
shall have no further rights. No current Customer Contract provides that the
customer therein shall be entitled to sublicense or otherwise transfer to a
third party any of the Intangibles relating to Seller Software unless such third
party agrees to be bound by the confidentiality provisions thereof and agrees to
pay Seller royalties and other amounts comparable to those under such Customer
Contract.
Except as set forth on SCHEDULE 4.9.7, each past or present customer
--------------
of Seller and each past or present customer of Seller to whom Seller disclosed
any of the Intangibles relating to Seller Software is bound by a confidentiality
provision which requires such past or present customer to take reasonable steps
to protect the rights of Seller in the Intangibles relating to Seller Software.
4.10. Adequacy of Seller's Assets. The Purchased Assets constitute, in the
---------------------------
aggregate, all of the property necessary for the conduct of Seller's Business in
the manner in which and to the extent to which it is currently being conducted.
4.11. Documents of and Information With Respect to Seller.
---------------------------------------------------
4.11.1. SCHEDULE 4.11 accurately and completely sets forth a true and
------------
complete list of all of the contracts of Seller which are material to the
Purchased Assets or Seller's Business (the "Material Contracts"), including,
without limitation, the following:
A. Each policy of insurance in force with respect to the
assets and properties of Seller and each of the performance or other surety
bonds maintained by Seller in the conduct of its business;
B. Each promissory note, loan, credit agreement, guarantee,
security agreement or similar document or instrument to which Seller is a party
or by which it is bound;
C. Each lease of personal property to which Seller is a party
or by which it is bound which involves rental payments which, if annualized,
would exceed $5,000.00;
D. Any other agreement, contract or commitment to which
Seller is a party or by which it is bound which involves a future commitment by
Seller in excess of $5,000.00 and which cannot be terminated without liability
on ninety (90) days or less notice; and
17
E. The name of each bank in which Seller has an account or
safe-deposit box, the name in which the account or box is held and the names of
all persons authorized to draw thereon or to have access thereto.
The contracts listed on SCHEDULE 4.11 together with the License
-------------
Agreements and Third Party License Agreements listed on SCHEDULE 4.9.1 are
--------------
referred to herein as the "Material Contracts."
Seller has previously furnished Buyer with a true and complete copy of
each such written agreement, contract or commitment listed in SCHEDULE 4.11.
-------------
There has not been any default in any obligation to be performed by Seller which
is uncured and outstanding, nor to the best knowledge of Seller and
Shareholders, any other party, under any such instrument. Except as set forth
on SCHEDULE 4.9.1 and SCHEDULE 4.11, Seller is not a party to or bound by any
-------------- -------------
other Material Contracts.
All Material Contracts have been entered into in the ordinary course
of business, are on normal and reasonable commercial terms and are not unduly
favorable to the parties thereto other than Seller. To the best knowledge of
Seller and Shareholders, no Material Contract will likely result in a loss to
Seller upon completion of performance or which cannot readily be fulfilled or
performed by Seller in accordance with its terms without undue or unusual
expenditures of money or effort.
4.11.2 Seller carries insurance, which is customary in scope and
reasonable in character and amount, with reputable insurers, covering all of its
Business assets, properties and business, and it has provided all required
performance or other surety bonds.
All premiums and other payments which become due under the policies of
insurance listed in SCHEDULE 4.11.2 have been paid in full and, to the extent
---------------
relating to periods prior to the Closing Date, will be paid in full on or prior
to the Closing Date. All of such policies are now in full force and effect and
Seller has received no notice from any insurer, agent or broker of the
cancellation of, or any increase in premium with respect to, any of such
policies or bonds. No insurer has the right to make retrospective premium
adjustments with respect to any of such policies.
Except as set forth in SCHEDULE 4.11.2, Seller has received no
---------------
notification from any insurer, agent or broker denying or disputing any claim
made by Seller or denying or disputing any coverage for any such claim or the
amount of any claim. Except as set forth in SCHEDULE 4.11.2, Seller has no
---------------
claim against any of its insurers under any of such policies pending or
anticipated and there has been no occurrence of any kind which would give rise
to any such claim.
4.11.3. SCHEDULE 4.11.3 sets forth a complete list of all of Seller's
---------------
current Business customers (defined as having received products or services from
Seller within the last three (3) years) by category and the month of December,
1997, and year-to-date (through December 31, 1997) revenue of Seller by category
for certain periods set forth therein.
18
4.12. Litigation Involving Seller and Shareholders. Except as set forth on
--------------------------------------------
SCHEDULE 4.12, there are no actions, suits, claims, governmental investigations
-------------
or arbitration proceedings pending or, to the best knowledge of Seller and
Shareholders, threatened against or affecting Seller or any of its assets or
properties or Shareholders with respect to or relating to Seller and, to the
best of the knowledge of Seller and Shareholders, there is no basis for any of
the foregoing. There are no outstanding orders, decrees or stipulations issued
by any federal, state, local or foreign judicial or administrative authority in
any proceeding to which Seller is or was a party.
4.13. No Adverse Change. Since the date of the Closing Date Balance Sheet,
-----------------
all changes in the Business or Business properties of Seller, or in its
consolidated financial condition, including changes occurring in the ordinary
course of business, have not had or will not have an adverse effect on the
business, properties, financial condition, business prospects or operating
results of Seller. There is not, to the best knowledge of Seller and
Shareholders, any threatened or prospective event or condition of any character
whatsoever which could adversely affect the assets, properties, business,
financial condition or results of operations of the Business Seller.
4.14. Absence of Certain Acts or Events. Except as disclosed in SCHEDULE
--------------------------------- --------
4.14, since the date of the Closing Date Balance Sheet, with respect to the
----
Business, Seller has not:
A. Sold or transferred any of its assets other than in the ordinary
course of business;
B. Made or obligated itself to make capital expenditures aggregating
more than $10,000.00;
C. Incurred any material obligations or liabilities (including any
indebtedness) or entered into any material transaction, except for this
Agreement and the transactions contemplated hereby;
D. Suffered any theft, damage, destruction or casualty loss in excess
of $5,000.00; or
E. Except as disclosed on SCHEDULE 4.14, declared or paid any
-------------
dividends or made any other distributions with respect to its shares or redeemed
or purchased any of its shares.
4.15. Compliance With Laws by Seller.
------------------------------
4.15.1. To the best knowledge of Seller and Shareholders, Seller is in
compliance with all laws, regulations and orders applicable to Seller, its
assets, properties and business. Seller has not received notification of any
asserted past or present failure to comply with any laws, and to the best
knowledge of Seller and Shareholders, no proceeding with respect to any such
violation is contemplated.
19
4.15.2. To the best knowledge of Seller and Shareholders, Seller has
not made any payment of funds prohibited by law in connection with the Business
of Seller, and no funds have been set aside to be used in connection with the
Business of Seller for any payment prohibited by law.
4.16. Employment and Labor Matters.
----------------------------
4.16.1. SCHEDULE 4.16 lists all employees and agents who on the date
-------------
hereof perform services on a regular basis in the Business operations of or for
Seller. No such employee or agent has terminated or given notice of termination
of his employment as of the date hereof, nor, to the knowledge of Shareholders
or Seller, plans to refuse employment with Buyer after the Closing Date.
4.16.2 To the best knowledge of Seller and Shareholders, Seller has
complied with all applicable federal, state and local laws, rules and
regulations and ordinances respecting health, safety and working conditions of
its employees, including, without limitation, the Occupational Safety and Health
Act of 1970, Pub. L. 91-596, as amended, and all similar applicable federal,
state and local laws, rules, regulations and ordinances, and has provided Buyer
with copies of all reports filed and notices provided under any such laws,
rules, regulations and ordinances during the last five (5) years.
To the best knowledge of Seller and Shareholders, Seller's operations
do not involve any unusual risk to the health or safety of its employees
(including, without limitation, any risk associated with hazardous airborne
contaminants or hazardous chemicals or waste materials).
4.16.3 Seller is not a party to any agreement, contract or
arrangement, written or oral, providing for any payments to any person resulting
from the consummation of the transactions contemplated hereby, except for
payments to holders of shares of Seller's capital stock. Seller's obligation to
make any such payments shall constitute Excluded Liabilities.
4.17. Employee Benefits Matters.
-------------------------
4.17.1. SCHEDULE 4.17.1 lists all plans, programs, and similar
---------------
agreements, commitments or arrangements, whether oral or written, maintained by
or on behalf of Seller or any other party that provide benefits or compensation
to, or for the benefit of, current or former employees of Seller ("Plan" or
"Plans"). Except as set forth on SCHEDULE 4.17.1 only current and former
---------------
employees of Seller participate in the Plans. Copies of all Plans and, to the
extent applicable, all related trust agreements, actuarial reports, and
valuations for the most recent three (3) years, all summary plan descriptions,
prospectuses, Annual Report Form 5500s or similar forms (and attachments
thereto) for the most recent three (3) years, all Internal Revenue Service
determination letters, and any related documents requested by Buyer, including
all amendments, modifications and supplements thereto, have been delivered to
Buyer, and all of the same are or will be true, correct and complete.
4.17.2. With respect to each Plan to the extent applicable:
20
A. No litigation or administrative or other proceeding is
pending or threatened involving such Plan;
B. To the best knowledge of Seller and Shareholders, such Plan
has been administered and operated in substantial compliance with, and has been
amended to comply with all applicable laws, rules, and regulations, including,
without limitation, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Internal Revenue Code, and the regulations issued under
ERISA and the Internal Revenue Code;
C. Seller and its predecessors, if any, have made and as of the
Closing Date will have made or accrued, all payments and contributions required,
or reasonably expected to be required, to be made under the provisions of such
Plan or required to be made under applicable laws, rules and regulations, with
respect to any period prior to the Closing Date, such amounts to be determined
using the ongoing actuarial and funding assumptions of the Plan;
D. Such Plan is fully funded in an amount sufficient to pay all
liabilities accrued (including liabilities and obligations for health care, life
insurance and other benefits after termination of employment) and claims
incurred to the date hereof, or the Closing Date Balance Sheet contains adequate
reserves or paid-up insurance has been provided, therefor;
E. On the Closing Date such Plan will be fully funded in an
amount sufficient to pay all liabilities accrued (including liabilities and
obligations for health care, life insurance and other benefits after termination
of employment) and claims incurred to the Closing Date, or adequate reserves
will be set up on Seller's books and records, or paid-up insurance will be
provided, therefor; and
F. Such Plan has been administrated and operated only in the
ordinary and usual course and in accordance with its terms, and there has not
been in the four (4) years prior hereto any increase in the liabilities of such
Plan beyond increases typically experienced by employers similar to Seller.
4.18. Due Authorization; Binding Obligation. The execution, delivery and
-------------------------------------
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by necessary corporate action of
Seller. This Agreement has been duly executed and delivered by Seller and
Shareholders and is a valid and binding obligation of each of them, enforceable
in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will:
A. Conflict with or violate any provision of the articles of
incorporation or bylaws of Seller, or of any law, ordinance or regulation or any
decree or order of any court or administrative or other governmental body which
is either applicable to, binding upon or enforceable against Seller or
Shareholders; or
21
B. Result in any breach of or default under any mortgage, contract,
agreement, indenture, will, trust or other instrument which is either binding
upon or enforceable against Seller or Shareholders or the assets and properties
of Seller or Shareholders.
Without limiting the generality of the foregoing, neither Seller or
Shareholders are a party to any continuing agreement or understanding, made by
him or it or on his or its behalf, which limits in any way the ability of:
A. Seller and Shareholders to enter into this Agreement and perform
their respective obligations hereunder;
B. Seller to sell the Purchased Assets to Buyer and Buyer to purchase
the Purchased Assets, all on the terms and subject to the conditions set forth
herein; or
C. The parties hereto to consummate the transactions contemplated
hereby, nor has Seller or Shareholders breached any such agreement, or any prior
agreement, which breach would entitle the other party thereto to any equitable
or monetary remedies.
4.19. Consents and Approvals. Except as set forth in SCHEDULE 4.19, no
---------------------- -------------
consent, authorization or approval of, or exemption by, or filing with, any
governmental, public or self-regulatory body or authority (a "Governmental
Agency") or any other third party, including, without limitation, the licensors
of any Software, is required in connection with the execution, delivery and
performance by Seller or Shareholders of this Agreement or the consummation of
the transactions contemplated hereby or thereby or for the continuation by Buyer
of the business of Seller after the Closing in the same manner as presently
conducted or proposed to be conducted.
4.20. Related Party Transactions. Except as set forth in SCHEDULE 4.20,
-------------------------- -------------
Seller is not directly or indirectly a party to any contract, agreement, or
lease with, or any other commitment to:
A. Shareholders or any other party owning, or formerly owning,
beneficially or of record, directly or indirectly, any of the shares of capital
stock of Seller;
B. Any person related by blood, adoption or marriage to any such
party;
C. Any director or officer of Seller;
D. Any corporation or other entity in which any of the foregoing
parties has, directly or indirectly, at least a five percent (5%) beneficial
interest in the share capital or other type of equity interest in such entity;
or
E. Any partnership in which any such party is a general partner (any
or all of the foregoing being herein referred to as "Related Parties").
Without limiting the generality of the foregoing, except as disclosed in
SCHEDULE 4.20,
-------------
22
A. No Related Party, directly or indirectly, owns or controls any
assets or properties which are or have been used in the business of Seller; and
B. No Related Party, directly or indirectly, engages in or has any
significant interest in or connection with any business (x) which is or which
within the last three (3) years has been a competitor, customer or supplier of
Seller or has done business with Seller or (y) which as of the date hereof sells
or distributes products or services which are similar or related to Seller's
products or services.
4.21. Accuracy of Information Furnished by Seller and Shareholders. To the
------------------------------------------------------------
best knowledge of Seller and Shareholders, no representation, statement or
information in writing made or furnished by Seller or Shareholders or by any of
them to Buyer, including, without limitation, those contained in this Agreement
and the various schedules attached hereto and the other information and
statements previously furnished by Seller to Buyer in writing, contains or shall
contain any untrue statement of a material fact or omits or shall omit any
material fact necessary to make the information contained therein in light of
circumstances in which they were made, not misleading.
4.22. Customer Prepayments. Set forth on SCHEDULE 4.22 is a list of all
-------------------- -------------
existing contracts pursuant to which Seller is obligated to perform services
relating to its Business software products, including the amount of prepayments
received by Seller as of December 31, 1997, under such contracts, a description
of the services yet to be performed for which payment has been received, and the
number of employee hours Seller reasonably estimates must be expended by its
employees to complete such services. Such contracts are based on a good faith
estimate basis rather than a fixed bid basis. Also set forth on SCHEDULE 4.22 is
-------------
a list of all Business products and services prepaid and not yet delivered or
provided.
4.23. Books and Records. The books of account and other financial records
-----------------
to be transferred to Buyer pursuant hereto are complete and correct, are
maintained in accordance with all applicable laws, and are accurately reflected
in the Financial Statements. Seller has provided to Buyer and its
representatives true and complete copies of or access to all minute books, stock
register and other corporate records of Seller existing on the date hereof.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND INFOCURE.
In order to induce Seller to enter into this Agreement and consummate the
transactions contemplated hereunder, Buyer and InfoCure, jointly and severally,
makes the following representations and warranties:
5.1. Organization, Power and Authority of Buyer. Buyer is a corporation
------------------------------------------
duly organized and validly existing under the laws of the State of Georgia, with
full corporate power and authority to enter into this Agreement and to carry out
the transactions and agreements contemplated hereby.
5.2 Due Authorization; Binding Obligation. The execution, delivery and
-------------------------------------
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly
23
authorized by all necessary corporate actions of Buyer. This Agreement has been
duly executed and delivered by Buyer and is a valid and binding obligation of
Buyer, enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will:
A. Conflict with or violate any provision of the articles of
incorporation or bylaws of Buyer or of any decree or order of any court or
administration or other governmental body which is either applicable to, binding
upon or enforceable against Buyer; or
B. Result in any breach of or default under any mortgage, contract,
agreement, indenture, will, trust or other instrument which is either binding
upon or enforceable against Buyer.
5.3. Accuracy of Information Furnished by Buyer. No representation,
------------------------------------------
statement or information made or furnished by Buyer to Seller in writing
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein, in light of the circumstances
in which they were made, not misleading.
5.4. Accuracy of Information Furnished by Buyer and InfoCure. No
-------------------------------------------------------
representation, statement or information in writing made or furnished by Buyer
or InfoCure or by both of them to Seller and Shareholders, including, without
limitation, those contained in this Agreement and the various schedules attached
hereto and the other information and statements previously furnished by Buyer to
Seller in writing, contains or shall contain any untrue statement of a material
fact or omits or shall omit any material fact necessary to make the information
contained therein in light of circumstances in which they were made, not
misleading.
5.5. No Adverse Change. Since December 31, 1997, all changes in the
-----------------
business or properties of Buyer or InfoCure, or in their consolidated financial
condition, including changes occurring in the ordinary course of business, have
not had or will not have an adverse effect on the business, properties,
financial condition, business prospects or operating results of Buyer or
InfoCure. There is not, to the best knowledge of Buyer and InfoCure, any
threatened or prospective event or condition of any character whatsoever which
could adversely affect the assets, properties, business, financial condition or
results of operations of Buyer or InfoCure.
6. ADDITIONAL COVENANTS OF SELLER AND SHAREHOLDERS.
24
6.1. Best Efforts. Seller and Shareholders will each use its respective
------------
best efforts to cause to be satisfied as soon as practicable and prior to the
Closing Date all of the conditions set forth in Section 9. to the obligation of
Buyer to purchase the Purchased Assets.
6.2. Conduct of Business Pending the Closing. From and after the
---------------------------------------
execution and delivery of this Agreement and until the Closing Date, except as
otherwise provided by the prior written consent of Buyer:
6.2.1. Seller will: (i) conduct its business and operations in the
manner in which the same have heretofore been conducted; (ii) preserve its
business organization intact; (iii) keep available the services of its officers,
employees, agents and distributors and (iv) preserve its relationships with
customers, suppliers and others having dealings with Seller;
6.2.2. Seller will maintain all of its properties in customary
repair, order and condition, reasonable wear and use and damage by unavoidable
casualty excepted, and to maintain insurance of such types and in such amounts
upon all of its properties and with respect to the conduct of its business as
are in effect on the date of this Agreement;
6.2.3. Seller will: (i) not sell or transfer any of its assets other
than in the ordinary course of business consistent with past practices or (ii)
not incur any material obligations or liabilities or enter into any material
transaction, contract, arrangement or agreement without the prior written
consent of Buyer; and
6.2.4. Seller will not increase the compensation payable or to become
payable to any director, officer, employee or agent of Seller, make any profit-
share payment or other arrangement (whether current or deferred) to or with any
director, officer, employee or agent, hire any employee, officer or director,
consultant, or agent without the prior written approval of Buyer.
6.3. Access to Seller's Plants, Properties and Records. From and after
-------------------------------------------------
the execution and delivery of this Agreement, Seller will afford to the
representatives of Buyer access, during normal business hours and upon
reasonable notice, to Seller's premises sufficient to enable Buyer to inspect
the assets and properties of Seller, and Seller will furnish to such
representatives during such period all such information relating to the
foregoing investigation as Buyer may reasonably request; provided, however, that
any furnishing of such information to Buyer and any investigation by Buyer shall
not affect the right of Buyer to rely on the representations and warranties made
by Shareholders or Seller in or pursuant to this Agreement, and, provided
further that Buyer will hold in confidence all documents and information
concerning Seller so furnished.
6.4. No Other Discussions. Commencing on the date hereof and extending
--------------------
through and including the earlier of the Closing Date or termination of this
Agreement pursuant to Section 13.3., Seller will, and Shareholders will use
Shareholders' best efforts to cause Seller to, discontinue negotiations with
others and will not continue or enter into discussions or negotiate with or
entertain or accept the unsolicited offer of any other party concerning the
potential sale of all or any part of the assets or shares of Seller or the
merger, consolidation or other business
25
combination of Seller with any person other than Buyer. Seller will, and
Shareholders will use Shareholders' best efforts to cause Seller to, notify
Buyer of any offers or inquiries with respect thereto and provide copies of any
written offers or proposals.
6.5. Employee Benefit Plans and Termination of Employment of Certain of
------------------------------------------------------------------
Seller's Employees. Seller, Buyer, and Shareholders hereby covenant
------------------
and agree as follows with regard to all ERISA Plans (as defined in Section
4.17.3. hereof) maintained by Seller and with respect to the termination of
employment of Seller employees by Buyer following the Closing:
A. Benefit Plans. Shareholders and Seller covenant and agree to hold
-------------
Buyer harmless from and indemnify Buyer against all liabilities for any benefits
payable under any Benefit Plan as of the Closing Date.
B. Health Insurance. Seller and Shareholders hereby covenant and
----------------
agree that Seller will promptly pay (or properly accrue on the Closing Date
Balance Sheet) all obligations that are payable under any health insurance plan
maintained by Seller or Seller as of the Closing Date.
C. Disability Insurance. Seller will promptly pay (or properly
--------------------
accrue on the Closing Date Balance Sheet) all obligations that are payable under
any disability plan maintained by Seller as of the Closing Date with respect to
any Seller employee.
D. Bonuses. Seller and Shareholders hereby covenant and agree that
-------
Seller will pay all bonuses earned by employees or former employees of Seller as
of the Closing Date. Buyer shall have no liability for bonuses earned or
expected as of the Closing Date.
E. COBRA and HIPAA. Seller hereby covenants and agrees that it will
---------------
promptly deliver to all employees of Seller, and such employees' dependents,
appropriate notices and documentation under applicable provisions of the
Consolidated Budget Reconciliation Act of 1985 and the Health Insurance
Portability and Accountability Act of 1996.
F. Prior Service Credit for 401(k), Employee Stock Option and
----------------------------------------------------------
Employee Stock Purchase Plans. In determining whether an employee of Buyer has
-----------------------------
met the waiting period requirement for participation in Buyer's 401(k), Employee
Stock Option and Employee Stock Purchase Plans, Buyer hereby covenants and
agrees to provide such employee with credit for time employed by Seller.
G. Termination of Employment of Certain Employees. The parties
----------------------------------------------
acknowledge that upon the Closing Date, Buyer intends to terminate the
employment of certain of Seller's employees, whose employment Seller and
Shareholders have represented and warranted to be "at will."
7. OTHER COVENANTS OF SHAREHOLDERS.
26
In order to induce Buyer to enter into this Agreement and to consummate the
transactions contemplated hereunder, Shareholders agrees with Buyer as follows:
7.1. No Other Discussions. Commencing on the date hereof and extending
--------------------
through and including the earlier of the Closing Date or termination of this
Agreement pursuant to Section 13.3., Shareholders will discontinue negotiations
with others and will not enter into discussions or negotiate with or entertain
or accept the unsolicited offer of any other party concerning the potential sale
of all or any part of the assets or shares of the Business of Seller or the
merger or consolidation or other business combination of Seller with respect to
its Business with any person other than Buyer. Shareholders will notify Buyer of
any offers or inquiries with respect thereto and provide copies of any written
offers or proposals.
7.2. Best Efforts; Cooperation With Accountants. Shareholders will use
------------------------------------------
their respective best efforts to cause to be satisfied as soon as practicable
and prior to the Closing Date all of the conditions set forth in Section 9. to
the obligation of Buyer to purchase the Purchased Assets and will cooperate with
the Accountants in the preparation of the Closing Date Balance Sheet.
27
8. ADDITIONAL COVENANTS OF BUYER AND INFOCURE.
8.1. Best Efforts. Each of Buyer and InfoCure will use its best efforts
------------
to cause to be satisfied as soon as practicable and prior to the Closing Date
all of the conditions set forth in Section 10. to the obligation of Seller to
sell the Purchased Assets pursuant to this Agreement.
8.2. Restrictive Covenant Regarding Oral Surgery Business. Except as
----------------------------------------------------
otherwise consented to between the parties hereto (which consent shall not be
unreasonably withheld), InfoCure hereby agrees, on its own behalf and on behalf
of any subsidiary, affiliate or related entity other than Buyer (a "Related
----------------
Entity"), that during the Measurement Period, it shall not, directly or
indirectly, market, sell, service and/or support computer hardware and software
to/for healthcare professionals specializing in oral surgery ("Oral Surgeon");
provided, however, that nothing herein shall be construed as preventing the
-------- -------
following:
A. The continued performance by InfoCure and Rovak, Inc. ("Rovak") of
the orthodontic practice management system and forms business.
B. The performance of any installations or services identified on
SCHEDULE 8.2.
------------
C. Continuing to service and support platforms and maintain code (for
the purpose of complying with regulatory or industry requirements) installed by
InfoCure or a Related Entity, provided said Oral Surgeons have been first
introduced to Buyer.
9. CONDITIONS TO THE OBLIGATION OF BUYER AND INFOCURE.
The obligation of Buyer to purchase the Purchased Assets shall be subject
to the fulfillment at or prior to the Closing Date of each of the following
conditions, each of which is for the benefit of Buyer and InfoCure and any one
(1) or more of which may be waived by either Buyer or InfoCure:
9.1. Accuracy of Representations and Warranties and Compliance With
--------------------------------------------------------------
Obligations.
-----------
The representations and warranties of Shareholders and Seller contained in
this Agreement shall have been true and correct at and as of the date hereof,
and they shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time.
Shareholders and Seller shall have performed and complied with all of their
obligations required by this Agreement to be performed or complied with at or
prior to the Closing Date.
Shareholders and Seller shall have delivered to Buyer a certificate, dated
as of the Closing Date and signed by each Shareholder and the President of
Seller, certifying that such representations and warranties are thus true and
correct and that all such obligations have been thus performed and complied
with.
28
9.2. Opinion of Counsel. Buyer shall have received an opinion dated the
------------------
Closing Date from ▇'▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.C., counsel for Seller and
Shareholders, substantially in form and substance as set forth on EXHIBIT I
---------
attached hereto.
9.3. Receipt of Necessary Consents. All necessary consents or approvals
-----------------------------
of third parties to any of the transactions contemplated hereby, the absence of
which would affect Buyer's rights hereunder, shall have been obtained and shown
by written evidence reasonably satisfactory to Buyer.
9.4. No Adverse Litigation. There shall not be pending or threatened any
---------------------
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the sale of the Purchased Assets
to Buyer or any other transaction contemplated hereby, or which might affect the
right of Buyer to own the Purchased Assets or to operate the business formerly
operated by Seller and which, in the judgment of Buyer, makes it inadvisable to
proceed with the purchase of the Purchased Assets.
9.5. Restrictive Covenant Agreements. Each of Seller and Shareholders
-------------------------------
shall have each entered into a restrictive covenant agreement (the "Restrictive
Covenant Agreement") with Buyer, substantially in the form of EXHIBIT J hereto.
---------
9.6. Employment Agreements. ▇. ▇▇▇▇▇ and ▇. ▇▇▇▇▇ shall have each
---------------------
entered into an employment agreement with Buyer, substantially in the forms of
EXHIBIT K and EXHIBIT L hereto, respectively.
--------- ---------
9.7. Directors and Shareholders Resolutions; Good Standing. Seller shall
-----------------------------------------------------
have delivered to Buyer a certificate evidencing the good standing of Seller as
of a recent practicable date, and a certified copy of the resolutions of the
Directors and Shareholders of Seller approving the execution, delivery and
performance by Seller of this Agreement and all the other transactions to be
taken by Seller contemplated herein.
9.8. Employee Covenants Agreements. Each employee, agent, officer and
-----------------------------
director of Seller listed on SCHEDULE 9.8 shall have executed and delivered to
------------
Buyer a Covenants Agreement in favor of Buyer in the form of EXHIBIT M.
---------
9.9. Assignment of Intellectual Property. At or prior to Closing,
-----------------------------------
Shareholders shall assign to Buyer any rights they may have in or to the
Software and Intangibles.
9.10. Buyer's Lender's Approval. On or before February 24, 1998, Buyer
-------------------------
shall have obtained the commitment of Finova Capital Corporation ("Finova") to
make a term loan or loans to Buyer sufficient to fund fully all of Buyer's
obligations under this Agreement to pay the cash portion of the Purchase Price
(the "Finova Commitment"). The term of the loan shall be sufficient so that such
loan can be amortized over a period of no less than five (5) years.
9.11. Lender's Loan. On or before the Closing, Finova shall have made to
-------------
Buyer a term loan equal to or in excess of the cash portion of the purchase
price, on the same terms and conditions as set out in the Finova Commitment.
29
9.12. Subscription Agreement. Seller and Shareholders shall have each
----------------------
entered into a Subscription Agreement with InfoCure in the form of EXHIBIT N.
---------
9.13. Source Code.
-----------
Seller shall deliver its source code to Buyer within seven (7) days of the
Closing Date.
10. CONDITIONS TO OBLIGATION OF SELLER.
The obligation of Seller to sell the Purchased Assets shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions, each of which is for the benefit of Seller and the Shareholders and
any one (1) or more of which may be waived by them:
10.1. Accuracy of Representations and Warranties and Compliance With
--------------------------------------------------------------
Obligations.
-----------
The representations and warranties of Buyer and InfoCure contained in this
Agreement shall have been true and correct at and as of the date hereof, and
they shall be true and correct at and as of the Closing Date with the same force
and effect as though made at and as of that time.
Buyer and InfoCure shall have performed and complied with all of their
respective obligations required by this Agreement to be performed or complied
with at or prior to the Closing Date.
Each of Buyer and InfoCure shall have delivered to Seller a certificate,
dated as of the Closing Date and signed by each of their respective Presidents,
certifying that such representations and warranties are thus true and correct
and that all such obligations have been thus performed and complied with.
10.2. Opinion of Counsel. Seller shall have received an opinion, dated
------------------
the Closing Date, from ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel to Buyer and
InfoCure, substantially in form and substance as set forth in EXHIBIT O attached
---------
hereto.
10.3. No Adverse Litigation. There shall not be pending or threatened any
---------------------
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the sale of the Purchased Assets
by Seller or any other transaction contemplated hereby or which, in the judgment
of Seller, makes it inadvisable to proceed with the sale of the Purchased
Assets.
11. ADDITIONAL AGREEMENTS.
30
11.1. Execution of Further Documents. From and after the Closing, upon
------------------------------
the reasonable request of Buyer, Seller and Shareholders shall, and Shareholders
shall cause Seller to, execute, acknowledge and deliver all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may be required to convey and transfer to and vest in Buyer and protect its
rights, title and interest in the Purchased Assets and as may be appropriate
otherwise to carry out the transactions contemplated by this Agreement.
11.2. Use of Name. After the Closing, Seller shall not conduct any
-----------
business under the name "Micro-Software Designs", "Micro-Designs" or "Micro-
Designs Software Corporation" or under any name deceptively or confusingly
similar thereto, and shall only use such name as necessary to wind down Seller's
Business.
11.3. Nonassignable Contracts. To the extent that the assignment
-----------------------
hereunder by Seller to Buyer of any contract, commitment, license, lease or
other agreement of Seller (the "Contracts") is prohibited or is not permitted
without the consent of any other party to the Contract, this Agreement shall not
be deemed to constitute an assignment of any such Contract if such consent is
not given or if such assignment otherwise would constitute a breach of, or cause
a loss of contractual benefits under, any such Contract, and Buyer shall assume
no obligations or liabilities thereunder.
Prior to the Closing, Seller shall advise Buyer promptly in writing with
respect to any Contract as to which it knows it will not receive any required
consent. Without in any way limiting Seller's obligation pursuant to Section
9.3. to obtain all consents and waivers necessary for the sale, transfer,
assignment and delivery of the Contracts and the Purchased Assets to Buyer
hereunder, if any such consent is not obtained or if such assignment is not
permitted irrespective of consent and the Closing hereunder is consummated,
Seller shall, if requested by Buyer, cooperate with Buyer in any reasonable
arrangement designed to provide Buyer with the rights and benefits (subject to
the obligations) under the Contract, including, if reasonably requested by
Buyer, by enforcing for the benefit of Buyer any and all rights of Seller
against any other person arising out of breach or cancellation by such other
person, acting as an agent on behalf of Buyer, subcontracting to Buyer the right
to perform under the Contract on the same economic terms as applied to Seller
prior to the Closing and acting as Buyer shall otherwise reasonably require, in
each case at Buyer's expense.
Acceptance of any such arrangement shall constitute a waiver by Buyer of
any claim or alleged breach under this Agreement with respect to such Contracts.
31
11.4. Enforcement of Confidentiality Agreements. From and after the
-----------------------------------------
Closing Date, Seller and Shareholders shall enforce, on behalf of Buyer, any
confidentiality agreements which cannot be assigned to Buyer pursuant to this
Agreement.
11.5. Announcements. Seller and Buyer shall work together after the
-------------
Closing to coordinate the preparation and mailing by each of any announcements
each of them desires to make to customers relating to this transaction.
12. INDEMNIFICATION.
12.1. Agreement by Seller and Shareholders to Indemnify. Seller and
-------------------------------------------------
Shareholders, jointly and severally (Seller and Shareholders, the "Seller
Indemnifying Parties"), agree that they will indemnify and hold harmless Buyer
and InfoCure and each of their respective officers, directors, shareholders,
successors and assigns (collectively, the "Seller Indemnified Parties") in
respect of the aggregate of all indemnifiable damages caused to the Business or
any of the Seller Indemnified Parties.
For this purpose, "indemnifiable damages" caused to the Business or any of
the Seller Indemnified Parties means the aggregate of all expenses, losses,
penalties, costs, deficiencies, liabilities and damages (including related
counsel fees and expenses) incurred or suffered by the Business or such Seller
Indemnified Party resulting from:
A. Any inaccurate representation or warranty made by Seller or
Shareholders in or pursuant to this Agreement;
B. Any default in the performance of any of the covenants or
agreements made by Seller or by Shareholders in this Agreement;
C. The failure of any of Seller and Shareholders to pay, discharge or
perform any liability or obligation of Seller and Shareholders which is not an
Assumed Liability; or
D. Any actions, claims, proceedings, demands, grievances or disputes
brought or initiated by third parties against the Business or any of the Seller
Indemnified Parties in connection with an Excluded Liability; or
E. With respect to any agreements, oral or written, with customers
that are not in the form of the license agreement identified as "A" in SCHEDULE
--------
4.9.7 and with respect to any distribution of the Seller Software not subject to
-----
any written agreement (such contractual and non-contractual relationships are
collectively referred to as the "Subject Relationships"), any losses associated
with the loss or claim of loss of trade secret or confidential information
rights as a result of the failure to obtain trade secret and confidential
information protection contained in the license agreement identified as "A" in
SCHEDULE 4.9.7 (the "A Agreement"); or
--------------
F. With respect to the Subject Relationships, any losses or claims of
loss occurring as a result of a customer or such customer's employees or agents
exceeding the scope of the licenses for the Seller Software expressly set forth
in the A Agreement; or
32
G. With respect to the Subject Relationships, any losses or damages
suffered by the Seller Indemnified Parties that would have been waived,
disclaimed, or limited had the Subject Relationship been governed by the terms
of the A Agreement, such losses or damages including, without limitation, claims
related to implied warranties, claims of lost profits or consequential damages,
claims of damages for intellectual property infringement in excess of the rights
available to a customer under the A Agreement, or claims or damages in excess of
any cap on liability set forth in the A Agreement.
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable damages", the Seller Indemnified Parties shall
have the right to be put in the same financial position as they would have been
had each of the representations and warranties of Seller and Shareholders been
true and correct and had each of the covenants of Seller and Shareholders been
performed in full.
The amount of any indemnifiable damages otherwise payable to a Seller
Indemnified Party hereunder shall be reduced if the indemnifiable damages
incurred by such Seller Indemnified Party will provide such Seller Indemnified
Party with income tax deductions or credits. The amount of the reduction shall
be the amount of the actual cash tax savings realized by such Seller Indemnified
Party as a result of such deductions or credits, discounted to its present value
as of the date of the payment of the indemnifiable damages from the date such
indemnifiable damages were incurred by such Seller Indemnified Party at the rate
of interest charged on such date by the Internal Revenue Service on underpayment
of taxes.
The foregoing obligation of Seller Indemnifying Parties to indemnify the
Seller Indemnified Parties shall be subject to each of the following principles
or qualifications:
12.1.1. Each of the representations and warranties made by Seller and
Shareholders in this Agreement or pursuant hereto, shall survive for a period of
two (2) years after the Closing Date, notwithstanding any investigation at any
time made by or on behalf of Buyer or InfoCure, and thereafter all such
representations and warranties shall be extinguished; provided, however, that
the representations and warranties made by Seller and Shareholders to the extent
they relate to Seller's title to the Assets shall survive forever and that the
representations and warranties made by Seller and Shareholders in Section 4.5.
hereof ("Tax Matters") shall in each case survive until the first (1st)
anniversary of the later of:
A. The date on which applicable period of limitation on
assessment or refund of tax has expired; or
B. The date on which the applicable taxable year (or portion
thereof) has been closed.
No claim for the recovery of indemnifiable damages may be asserted by a
Seller Indemnified Party against Seller Indemnifying Parties or their successors
in interest after such representations and warranties shall be thus
extinguished; provided, however, that claims first asserted in writing within
the applicable period shall not thereafter be barred unless, if unresolved,
they are not prosecuted by the commencement of litigation within ninety (90)
days
33
after the date when such representations and warranties were extinguished.
In addition, the Seller Indemnifying Parties shall have no liability with
respect to indemnifiable damages until the total of all such damages exceeds
$40,000.00 in which event the Seller Indemnifying Parties shall be obligated to
indemnify the Seller Indemnified Parties as provided herein for all such
damages. Notwithstanding the foregoing, in no event shall the aggregate
liability of the Seller Indemnifying Parties under this Section 12. exceed the
Purchase Price.
12.2. Agreements by Buyer and InfoCure to Indemnify. Buyer and InfoCure
---------------------------------------------
(the "Buyer Indemnifying Parties"), jointly and severally, agree to indemnify
and hold Seller and Shareholders (the "Seller Indemnified Parties") harmless in
respect of the aggregate of all indemnifiable damages of any of Seller
Indemnified Parties.
For this purpose, "indemnifiable damages" of any of Seller Indemnified
Parties means the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including related counsel fees and expenses) incurred
or suffered by any of Seller Indemnified Parties resulting from:
A. Any inaccurate representation or warranty made by Buyer or
InfoCure or pursuant to this Agreement;
B. Any default in the performance of any of the covenants or
agreements made by Buyer or InfoCure in this Agreement; or
C. Buyer's non-assumption of the AT&T Lease and Envoy/NEIC Lease
listed on SCHEDULE 1.1.4.
--------------
Without limiting the generality of the foregoing, with respect to the
measurement of "indemnifiable damages", each of Seller Indemnified Parties shall
have the right to be put in the same financial position as they would have been
had each of the representations and warranties of Buyer Indemnifying Parties
been true and correct and had each of the covenants of Buyer Indemnifying
Parties been performed in full.
The amount of any indemnifiable damages otherwise payable to any Seller
Indemnified Party hereunder shall be reduced if the indemnifiable damages
incurred by Seller Indemnified Party will provide such Party with income tax
deductions or credits. The amount of the reduction shall be the amount of the
actual cash tax savings realized by Seller Indemnified Party as a result of such
deductions or credits discounted to its present value as of the date of the
payment of the indemnifiable damages from the date such indemnifiable damages
were incurred by Seller Indemnified Party at the rate of interest charged on
such date by the Internal Revenue Service on underpayment of taxes.
The foregoing obligation of Buyer Indemnifying Parties to indemnify Seller
Indemnified Parties shall be subject to each of the following principles or
qualifications:
34
12.2.1. Each of the representations and warranties made by Buyer and
InfoCure in Article V. of this Agreement shall survive for a period of two (2)
years after the Closing Date, and thereafter all such representations and
warranties shall be extinguished.
No claim for the recovery of indemnifiable damages pursuant to clause (i)
of Section 12.2. may be asserted by Seller Indemnified Parties against Buyer
Indemnifying Parties or its successors in interest after such representations
and warranties shall be thus extinguished; provided, however, that claims first
asserted in writing within the applicable period shall not thereafter be barred.
12.3. Matters Involving Third Parties. If any third party shall notify
-------------------------------
Buyer or Seller (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 12. then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent that) the Indemnifying Party thereby is
damaged.
If any Indemnifying Party notifies the Indemnified Party within fifteen
(15) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then:
A. The Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice satisfactory to the Indemnified Party;
B. The Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel to the extent the Indemnified Party
concludes that the counsel the Indemnifying Party has selected has a conflict of
interest);
C. The Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably);
D. The Indemnifying Party will not consent to the entry of any
judgment with respect to the matter, or enter into any settlement which does not
include a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld or delayed unreasonably).
If no Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, then the Indemnified Party
may defend against, or enter into any settlement with respect to, the matter in
any manner it may deem appropriate.
35
12.4. Other Agreements. Any indemnity obligations which Seller may have to
----------------
Buyer can be discharged by the Escrow Agent from the funds held in escrow
pursuant to Section 2.1.2. above.
13. MISCELLANEOUS.
13.1. Brokers' Commission. Buyer will indemnify and hold harmless Seller
-------------------
and Shareholders from the commission, fee or claim of any person, firm or
corporation employed or retained or claiming to be employed or retained by Buyer
to bring about, or to represent it in, the transactions contemplated hereby.
Seller and Shareholders will indemnify and hold harmless Buyer from the
commission, fee or claim of any person, firm or corporation employed or retained
or claiming to be employed or retained by Seller or Shareholders to bring about,
or to represent them in the transactions contemplated hereby.
13.2. Amendment and Modification. The parties hereto may amend, modify and
--------------------------
supplement this Agreement in such manner as may be agreed upon by them in
writing.
36
13.3 Termination.
-----------
13.3.1. Anything to the contrary herein notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby may be
abandoned:
13.3.1.1. By the mutual written consent of all of the Parties
hereto at any time prior to the Closing Date;
13.3.1.2. Unless terminated pursuant to Section 13.3.1.1. by
any Party in the event of the breach by any other Party of any provision of this
Agreement, which breach is not remedied by the breaching Party within ten (10)
days after receipt or notice thereof from the terminating party; or
13.3.1.3. Unless terminated pursuant to Section 13.3.1.1., by
any Party hereto if the Closing has not taken place by January 15, 1998.
If this Agreement is terminated pursuant to clause 13.3.1.1.
of this Section 13.3.1., no Party shall have any liability for any costs,
expenses, loss of anticipated profit or any further obligation for breach of
warranty or otherwise to any other Party to this Agreement. Any termination of
this Agreement pursuant to clauses 13.3.1.2. or 13.3.1.3. of this Section
13.3.1. shall be without prejudice to any other rights or remedies of the
respective parties.
13.3.2 The risk of any loss to the properties to be sold by Seller
hereunder and all liability with respect to injury and damage occurring in
connection therewith shall be the sole responsibility of Seller until the
completion of the Closing. If, in the opinion of Buyer, any material part of
said properties shall be damaged by fire or other casualty prior to the
completion of the Closing hereunder, then Buyer shall have the right and option:
13.3.2.1. To terminate this Agreement, without liability to
any party thereto; or
13.3.2.2. To proceed with the Closing hereunder, in which
event such casualty shall not constitute a breach by Seller of any
representation, warranty or covenant in this Agreement, and Buyer shall be
entitled to receive and retain the insurance proceeds arising from such
casualty.
37
13.4. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective successors, assigns, heirs
and legal representatives. This Agreement may not be assigned by Buyer and
InfoCure, jointly and severally, except to another corporation controlled by or
under common control with Buyer. In any such event, Buyer and InfoCure, jointly
and severally, shall remain directly liable for all undertakings and obligations
hereunder. This Agreement, including any rights to receive payments hereunder,
may not be assigned by Seller except to its Shareholders upon a dissolution or
liquidation of Seller.
13.5. Entire Agreement. This Agreement and the exhibits and schedules
----------------
attached hereto contain the entire agreement of the parties hereto with respect
to the purchase of the Purchased Assets and the other transactions contemplated
herein, and supersede all prior understandings and agreements of the parties
with respect to the subject matter hereof. Any reference herein to this
Agreement shall be deemed to include the schedules and exhibits attached hereto.
13.6. Headings. The descriptive headings in this Agreement are inserted for
--------
convenience only and do not constitute a part of this Agreement.
13.7. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts, each of which shall be deemed an original, and all of
which together will constitute one and the same instrument.
13.8. Notices. Any notice, request, information or other document to be
-------
given hereunder to any of the Parties by any other Party shall be in writing and
delivered personally or sent by certified or registered mail, postage prepaid,
as follows:
If to Seller or Shareholders, addressed to:
Micro-Software Designs, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇'▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.C.
Hartford Square North
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Buyer, addressed to:
InfoCure Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
39
With copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
Any party may change the address to which notices hereunder are to be sent
to it by giving written notice of such change of address in the manner herein
provided for giving notice. Any notice delivered personally shall be deemed to
have been given on the date it is so delivered, and any notice delivered by
registered or certified mail shall be deemed to have been given on the date it
is received or refused, if delivery is refused.
13.9. Schedules. To the extent any disclosure in a schedule puts Buyer on
---------
actual notice of the facts reflected therein, such disclosure shall be deemed to
be a disclosure in all other schedules under this Agreement as to such facts.
13.10. Governing Law/Arbitration/Consent to Jurisdiction. This Agreement
-------------------------------------------------
shall be governed by and construed in accordance with the laws of the State of
Georgia applicable to contracts made and to be performed herein. Any dispute,
controversy or claim arising out of, relating to or in connection with, this
Agreement, or the breach, termination or validity thereof shall be finally
settled by arbitration conducted in accordance with this Section. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA") in effect at the time
of the arbitration, except as they may be modified herein or by mutual agreement
of the parties. The seat of the arbitration shall be Atlanta, Georgia, and each
party hereto irrevocably submits to the jurisdiction of the arbitration panel in
Atlanta, Georgia. The arbitration shall be conducted by three (3) arbitrators,
at least two (2) of which are attorneys having more than seven (7) years
experience in the general mergers and acquisitions field. The party initiating
arbitration (the "Claimant") shall identify its arbitrator within twenty (20)
days of receipt of a request for arbitration (the "Request") and shall notify
the Claimant of such appointment in writing. If the Respondent fails to identify
an arbitrator within such twenty (20) day period, the arbitrator named in the
Request shall decide the controversy or claim as the sole arbitrator. Otherwise,
the two (2) arbitrators appointed by the parties shall appoint a third (3rd)
arbitrator within twenty (20) days after the Respondent has notified Claimant of
the appointment of the Respondent's arbitrator. When the third (3rd) arbitrator
has accepted the appointment, the two (2) party-appointed arbitrators shall
promptly notify the parties of the appointment. If the two (2) arbitrators
appointed by the parties fail or are unable to so appoint a third (3rd)
arbitrator, then the appointment of the third (3rd) arbitrator shall be made by
the AAA, which shall promptly notify the parties of the appointment. The third
(3rd) arbitrator shall act as chair of the panel. The arbitration award shall be
in writing and shall be final and binding on the parties. The award may include
an award of costs, including reasonable attorneys' fees and disbursements.
Judgment upon the award may be entered by any court having jurisdiction thereof
or having jurisdiction over the parties or their assets. Notwithstanding the
foregoing, the parties may apply to any court of competent jurisdiction for a
40
temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary, without breach of this Section and without
any abridgment of the powers of the arbitrators. The parties agree to be subject
to the jurisdiction of the Superior Court of ▇▇▇▇ County or United States
District Court for the Northern District of Georgia (provided said court has
subject matter jurisdiction), which shall be the exclusive venue and
jurisdiction for such adjudication, and the parties hereby agree to subject
themselves to the jurisdiction and venue of such court for all such purposes and
agree to waive any objections thereto.
13.11. Agreement as to Certain Contracts. Seller agrees to use its best
---------------------------------
efforts to cooperate with Buyer to obtain such consents as requested by Buyers.
If any consent required under any such Contracts, including any Material
Contract (as defined in Section 4.11.) is not obtained, Seller and Buyer will
enter into any reasonable arrangement designed to provide for (i) the complete
and full enjoyment by Buyer of all rights and benefits granted under any such
Contracts and (ii) the performance by Buyer of the obligations thereunder. Such
arrangements may include, without limitation, the appointment of Buyer as
Seller's agent or attorney-in-fact for such purpose, enforcement by Seller for
the benefit of Buyer of any and all rights of Seller against a third party or
otherwise, and Buyer using reasonable efforts to undertake any such arrangement
with Seller so as to impose on Seller the minimal expense, expenditure of time
and disruption of Seller's business as is reasonably practicable in the
circumstances. If a consent to assignment cannot be obtained, Buyer and Seller
shall enter into a reasonable alternative arrangement which may include a
subcontract arrangement structured in such a way so as not to impose any
additional cost to Seller and so as to enable Buyer to perform such Contract,
upon agreement of Buyer and Seller.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
BUYER:
MD Acquisition, Inc.
Attest:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇▇▇ ▇. Fine
---------------------------- ----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ , Secretary ▇▇▇▇▇▇▇▇▇ ▇. Fine, President
------------------
(CORPORATE SEAL)
INFOCURE:
InfoCure Corporation
Attest:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇▇▇ ▇. Fine
---------------------------- ----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ , Secretary ▇▇▇▇▇▇▇▇▇ ▇. Fine, President
------------------
(CORPORATE SEAL)
SELLER:
Micro-Software Designs, Inc.
Attest:/s/ ▇▇▇▇▇ ▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------- ----------------------------
▇▇▇▇▇ ▇▇▇▇▇ , Secretary ▇▇▇▇▇▇ ▇▇▇▇▇, President
------------------
(CORPORATE SEAL)
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇
42
EXHIBITS
--------
Exhibit A Escrow Agreement
Exhibit B Registration Rights Agreement
Exhibit C Certificates of Seller and Shareholders
Exhibit D Certificates of Buyer and InfoCure
Exhibit E ▇▇▇▇ of Sale
Exhibit F Lease Assignment
Exhibit G Wire Transfer Instructions
Exhibit H Assignment and Assumption Agreement
Exhibit I Opinion of Seller's Counsel
Exhibit J Restrictive Covenant Agreement
Exhibit K Employment Agreement - ▇▇▇▇▇▇ ▇▇▇▇▇
Exhibit L Employment Agreement - ▇▇▇▇▇ ▇▇▇▇▇
Exhibit M Covenants Agreements
Exhibit N Subscription Agreement
Exhibit O Opinion of Buyer's Counsel
43
SCHEDULES
---------
Schedule 1.1.4 Agreements not to be Assigned or Transferred
Schedule 1.1.11 Fixed Assets
Schedule 1.2.4 Excluded Assets
Schedule 2.1.1 Closing Date Financial Statements
Schedule 2.2 Assumed Liabilities
Schedule 2.4 Allocation of Purchase Price
Schedule 4.2 Subsidiaries
Schedule 4.3 Financial Statements
Schedule 4.4 Liabilities of Seller
Schedule 4.5 Tax Matters
Schedule 4.6 Real Estate
Schedule 4.7 Liens and Encumbrances
Schedule 4.9.1 Registration; License Agreements
Schedule 4.9.2 Software and Intangibles
Schedule 4.9.3 Millennium Compliant Matters
Schedule 4.9.4 Key Software Development Employees
Schedule 4.9.6 Interest in Software or Intangibles
Schedule 4.9.7 Standard Form Contracts
Schedule 4.11 Documents of and Information with Respect to
Seller
Schedule 4.11.2 Insurance Matters
Schedule 4.11.3 Customer List
44
Schedule 4.12 Litigation
Schedule 4.14 Absence of Certain Acts or Events
Schedule 4.16 Employment and Labor Matters
Schedule 4.17.1 Benefit Plans
Schedule 4.19 Consents and Approvals
Schedule 4.20 Related Party Transactions
Schedule 4.22 Customer Prepayments
Schedule 9.8 Persons Signing Covenants Agreements
45